The market was very volatile last week. On Thursday, mortgage rates spiked up due to the stock market posting great gains and hitting a 4 year high. On Friday, the August unemployment report was released and the amount of jobs created was lower than projected by the experts. The unemployment rate went down from 8.3% to 8.1%, but this was mainly due to people exiting the work force and not continuing to look for a job. This caused mortgage rates to finish the week on a high note, closing + 50 bps.

Expect more volatility this week highlighted in The Federal Open Market Committee (FOMC) news conference on Thursday. If the FED does not “ease”, I expect rates to go up as the market already built in pricing improvements based on Ben Bernanke’s hint last week that the FED can and will do more.

The FHFA announced on Friday that Fannie Mae and Freddie Mac will increase guaranteed fees by .1 basis points most likely by December 1st, which will equate to an approximate .5 point increase on pricing for all Fannie Mae and Freddie Mac backed loans moving forward. Almost all of the loans you hear advertised are Fannie Mae and Freddie Mac conforming loans.

EXAMPLE: If you are being offered a 3.5% 30 year fixed at 0 points. That same loan after the pricing change will cost approximately .5 points. This is a huge swing and I think signals the end of the debate on whether rates will drop lower.

Since this starts in December, lenders will likely adopt the new pricing some time in October – giving lenders enough time to close loans originated under old pricing.

If you are considering refinancing, I would recommend locking sometime before October as rates will go up.